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I Missed My Chance to Get With FRAN

Francescas Holdings (FRAN) is one of the top retail stocks around. Unfortunately, retail stocks are dangerous right now. Many lowered guidance during May and their stocks got hammered for it. Francescas on the other hand raised guidance after reporting earnings on June 7th. FRAN beat and raised — and the stock jumped on the news.

I wanted to buy FRAN when it was in the low $20s but was gun shy. Then the stock popped after it reported. I missed my chance and will wait for another.

The good news is FRAN did just increase estimates. 2012’s went from $0.81 to $0.91. That’s a good sign the coast is clear and we can proceed with investing — if we get the right price.

One Year Chart

Here’s FRAN’s one year chart. Profits have grown at triple-digit rates the past two quarters as the company has beaten the street each time (by 3 cents and 5 cents respectively). If the company beats by 4 cents this quarter that would be 86% growth.

FRAN’s P/E is 30 which isn’t too bad, but in this environment I have to be a little more cautious when investing in small retailers. I recently lost clients money in another specialty retailer named Body Central (BODY) and I don’t wish to make another mistake like that.

Fair Value

I think FRAN is worth 35 times profits, but when i look up at the one-year chart I see the stock came down to the $22-$23 level recently. That’s around 25 times profits and seems like a better entry point.

Sharek’s Take

FRAN is at the top of my Stocks on the Radar, but I’m a little gun shy about specialty retail in this environment. If the stock drops into the low $20s again I will probably get with FRAN.

View the Ten-Year Chart here.
View the Earnings Table here.

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